FAT32 - Both Windows and OS X can read and write to this format, but has a file size limitation. If you are planning on or may in the future want to move movie files between your Windows and your Mac - you do not want this file structure.
NTFS - This is the windows default format - OS X can read this format, but cannot write to it.
HFS+ - This is the OS X format - windows cannot read from it nor write to it.
As far as getting an external drive, get any USB external drive you want.
imho, once you get your drive -
Connect it to your PC and format it NTFS.
That is the standard windows format and you will have no worries about file sizes, etc.
On your Mac, grab the software in this
thread. It is in beta testing right now, but many of us are using it problem free. Go to post #36 and anatoly has a link there for beta # 2. Install this on your Mac. With this software your Mac will now be able to write to NTFS drives. It looks like the software will probably be around $25-30 once it is released. It's well worth it if you really need to move files back and forth between the two machines on an ongoing basis. There is an option for Windows to be able to read and write to HFS+, but it is $50.
This to me is the best way without having to any worries about file sizes and be able to move data between a Win and a Mac.
Once you get your drive, just google "format a drive in XP".
you'll get several good hits at the top of the page - look for one that tells you how to format a second drive - it's really easy once you do it a couple of times.